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Kames Capital’s Iain Buckle has warned that the eurozone debt crisis will return to triggering volatility before long, as the debt crisis comes back into focus.

Markets have been trading at resilient levels in recent weeks, in spite of the fact that European Central Bank (ECB) president Mario Draghi failed to deliver an expected injection of capital into the eurozone economy at a recent ECB press conference.

But Mr Buckle, co-manager of the £418.3m Kames Sterling Corporate Bond fund, said he was “sceptical” the current resilient sentiment would last long and he continues “to see Europe as the root of short-term volatility”.

“I’m afraid the machinations in Europe will hang over the market like a musty smell in the coming months,” he said.

In spite of that the manager continues to believe that investment grade bonds remain attractive in the medium to long term.

“For the majority of our investment universe the fundamental outlook is, at worst, stable,” he said.

“Credit spreads remain at historically attractive levels, albeit a little lower than this time last month.

“Demand for the asset class continues to be robust at a time when net issuance is negative. Throw in bank base rates being at exceptionally low levels for the foreseeable future and the case for investment grade credit continues to stack up.”

“We completely exited the fund’s position in Telefonica during the month,” he said.

“We became concerned that its strong link to the credit quality of the Spanish sovereign could see it downgraded to sub-investment grade in the coming months.

“Given the quantum of Telefonica bonds outstanding such a downgrade could be a significant negative technical factor. Other outright sales or reductions during the month included holdings in Deutsche Bahn, KPN, Fidelity, Royal London, and Priory Group.”